Government Operations Committee on Sept. 26th, 2024

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

As an entrepreneur, does all that leave you any room for entrepreneurial innovation? Renovating and restoring a heritage building, rather than demolishing it, is a laudable thing. We should thank you for that because you'd think that nothing in North America lasts for more than 50 years. However, do these compliance requirements stifle your innovation or prevent it from expanding?

[William Trudel]

It really complicates matters. Take CMHC, for example, the Canada Mortgage and Housing Corporation, another Crown corporation that we do a lot of work with. In recent years, as a result of rising interest rates, CMHC has literally propped up the housing market in Canada. If CMHC hadn't been around in the last two or three years, the situation would be catastrophic, way worse than it is now. I can attest to that.

However, the retail business has changed, since online sales have altered consumer habits. In our projects, we take old rundown shopping centres, partly dismantle them and remove their parking lots to recreate living environments including a university, an international-level hotel and affordable housing. However, we constantly run into regulatory frameworks that basically weren't designed for this new economic development model where we're repurposing former commercial properties in response to the housing crisis. This involves water issues relating to the national Cadastre du Québec, taking out cross guarantees and not preserving too many businesses in the former shopping centre because our business is a residential one. We constantly encounter compliance issues.

I dislike the lack of transparency shown by the federal Crown corporations with which we do business. We can never understand what we have to do to meet compliance requirements, and we're incapable of getting answers. Sometimes we even get this response:

We are a Crown corporation. We do not talk with the private sector or with a private party.

It gets really frustrating for us, when we pay CMHC millions of dollars a year in premiums, and I have to employ 10 people and numerous consultants, and we ultimately never understand how to move a file forward. As I often say, it would definitely be an improvement if we established The Twelve Tasks of Asterix as Canada's housing development model.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

That's quite clear, Mr. Trudel. Thank you. I gather from what you're telling me that you aren't criticizing the institutions as such, but rather the way they do things.

[William Trudel]

The Canada Mortgage and Housing Corporation, the Business Development Bank of Canada and the Office of the Superintendent of Financial Institutions are very important institutions that help Canadians. However, there's a philosophy issue, there's a transparency issue, and there's the fact that the Crown corporations will have to switch over to “client” mode. Ultimately, who's the client of BDC or CMHC? It's the entrepreneur who works 1,000 hours a week and manages to spend his weeks paying millions of dollars in premiums. At some point, we'll have to get back to basics, talk to our entrepreneurs and try to agree on innovative solutions with them instead of always whipping out the compliance tables.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you, Mr. Trudel.

[The Chair, Conservative, Kelly McCauley]

Thanks very much.

Mr. Bachrach, please go ahead, sir.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

Thank you very much, Mr. Chair.

I'd love to ask some questions of Mr. Beaulieu-Guay.

I'll start with a really high-level question. The concept of regulatory modernization is based in most cases, I believe, on this premise that regulations in our country are becoming more onerous and complex. I certainly hear from many small businesses that are frustrated by the complexity and the requirements of regulatory processes.

Is there data to suggest that this is the case countrywide, that on the whole, in general, Canada's regulatory environment is becoming more onerous?

[Dr. Louis-Robert Beaulieu-Guay]

Yes, regulatory accumulation is quite well documented, but efforts have been made to reduce it. I mentioned a few in my opening remarks.

To echo what Mr. Trudel was saying, you must also understand that small businesses are far more vulnerable to this increasing regulatory burden because they don't have a department dedicated to these issues and can't hire lawyers to deal with them.

In addition, as I mentioned earlier, small businesses have less access to regulatory bodies. When you start considering a rule, you look at the usual suspects, which are the big businesses, and the small businesses, citizens and non-governmental organizations won't intervene in the regulatory process until later, at a stage where consultations have somewhat less impact because the original rule has already been quite well established.

It's a well-documented fact that rules are more complex now, but that was foreseeable because the areas of activity of government and even society are becoming increasingly complex. I don't think we'll be reducing the regulatory framework for artificial intelligence or new technologies any time soon because those new technologies are disruptive and the regulatory framework has to adapt.

Consequently, although that's the way society goes, we mustn't fall victim to over‑regulation, as has already happened in the United States. That's why, every 10 or 15 years, a committee like this one attempts to determine whether we've gone too far and whether we can establish new procedures to calm things down somewhat and come up with necessary rules that are also well designed.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

Your point about the differential impact of regulations on small businesses and large enterprises is a really important one. I wonder if government's efforts at regulatory modernization should focus on those regulations that impact small businesses disproportionately.

Is that a fair recommendation?

[Dr. Louis-Robert Beaulieu-Guay]

Yes, I think so.

Big businesses, in many instances, have branches in other countries and whole departments whose only role is to deal with the regulations of various countries in other circumstances. They have consulting firms. They'll be prepared to react and adjust regardless of the regulatory framework the federal government imposes on them.

That's not the case of small businesses, which find it much harder to keep up with the regulatory pace. They aren't there to do this kind of work because, in many instances, they have a specific objective and clearly defined missions. They don't have large departments or connections with regulatory bodies through which they can ascertain what's coming. They aren't privy to draft regulations when authorities want to change or create new rules.

If authorities wish to modernize regulations, or if the Canadian regulatory context becomes more complex, it's definitely the small businesses that will suffer most.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

I'm curious about regulatory capture. Could you provide for the committee a definition of regulatory capture, and also your recommendations for how the Government of Canada can avoid regulatory capture across the regulatory environment?

[Dr. Louis-Robert Beaulieu-Guay]

Thank you.

Regulatory capture occurs when regulation drafters come to rely overly on the people who are to be regulated to determine the regulatory framework and, in the end, gather all their information from those same sources, which are the businesses and individuals that they'll have to regulate. As a result, those businesses exercise control over the regulations and can even use them as a barrier to competition and to secure an advantage for themselves.

The administration's transparency is the most effective tool to prevent this situation. When the administration addresses businesses in particular or individuals in a meeting setting, other concerned businesses and individuals must be made aware of that fact. In addition, subsequent consultations must be conducted in a very sincere manner, particularly at the notice of consultation and call for comments stage.

We have witnessed some egregious examples of this. Although not an example of regulatory capture, there was nevertheless an apparent conflict of interest in the Tiger Team and genome-editing case. In that instance, the businesses provided the public administrators with talking points. Essentially, the regulations were virtually developed by the business and the private sector before consultations were even held or comments had been received from other sectors, particularly the health sectors and non‑governmental organizations.

If, at the start of the process, you only consult certain businesses or stakeholders that frequently interact with the industry, and, in addition, don't sincerely consult other actors, there can be a risk of regulatory capture. Transparency makes it possible to identify these connections, to know with whom you've spoken and when. If discussions are open, there will be no further apparent conflict of interest or regulatory capture. Transparency is therefore the solution.

[The Chair, Conservative, Kelly McCauley]

Thank you very much.

We'll now go to our second round. We'll start with Mr. Gourde.

Mr. Gourde, welcome back to OGGO. The floor is yours, sir.

[Jacques Gourde, Conservative, Lévis—Lotbinière, QC]

Thank you, Mr. Chair.

Mr. Trudel, your testimony is music to my ears. One of the biggest challenges we'll be facing over the next 10 or even 20 years will be the construction of housing and other buildings, somewhat as what you're doing based on your expertise.

Yes, the regulations are really burdensome. At the risk of exposing you to further costs, would it be possible for you to ask your lawyers to send the committee a note on how to improve all the paperwork and red tape that adversely affects you?

To what degree do you think this delays your projects? Have you cancelled any projects because the required process was too burdensome? Have you lost years? Have you lost a number of doors? We really need a lot of doors in Canada right now. Contractors like you are really in a bind that puts you behind schedule. When you're spending time completing documents, you aren't building housing.

[William Trudel]

We calculate project delays in numbers of years. That's the case for thousands of residential units for our company alone.

I've been in the media in the Quebec City area for most of today. One of our projects, which was announced a few days ago, will be delayed another 12 months as a result of a regulatory framework, a municipal one in this case. Right now, we're working on an approximately $225‑million phase at Fleur de Lys that will comprise 480 units, 15% of them affordable units—I promise—and 48 units for people living with disabilities. As the insurance certificate was being issued, the Canada Mortgage and Housing Corporation decided to cut funding by $16 million. To this day, I still don't understand why. Fortunately, we had the $16 million and used it to complete the project, which wasn't delayed as a result. However, there are consequences to that: In three or four years, once we've reached phases 5, 6 and 7, that $16 million won't be available and we may have to delay those phases. I hope I can organize a second funding round with CMHC for that property, but the compliance grid doesn't allow for it. We aren't supposed to do that. I may be able to reopen the file, and, once again, I'll of course have to pay millions of dollars in fees for a new analysis of the same file. We spend our lives delaying projects and paying fees without understanding why.

[Jacques Gourde, Conservative, Lévis—Lotbinière, QC]

Let's go back to the compliance grid. I understood from your statement earlier that you had trouble finding someone who could take responsibility within the organization. If that isn't entered in the compliance grid, you can't get an answer and you'll circumvent it.

In fact, it's because no one in these organizations is able to make a decision, to say that they support you and that it will work. This should operate somewhat as at a bank: They support you or they don't, but at least you know where you stand. When you're forced to do a lot of things—without being told—that are all wrong—

[William Trudel]

Actually, I'd go even further than your comment.

I regularly receive responses from officials who know that it's the right thing to do and that I'm right, but that their internal regulations, in the federal government and at the Crown corporation, don't allow them to do it. Then I ask them what we can do, and what I can do, since everyone has understood that it's the obvious thing to do. So I call my MP, who tells me that he understands my story but that a Crown corporation is involved and there's nothing he can do. Then I try calling the Crown corporation, which tells me that, since it's a Crown corporation, it can't speak to people. I ask whether there's an Ombud or if someone in the federal government can give me an answer, but the answer is no. So I look for another way around this. I try to present the file differently; I try to ask my architects to do an eighth iteration in an attempt to make the project fit within a compliance grid so the whole thing ultimately works. We waste one, two or three years, and people have nowhere to live in the meantime.

[Jacques Gourde, Conservative, Lévis—Lotbinière, QC]

Should we cut red tape by 50% or 60% to expedite matters? Everyone knows the major challenge is that we have to build housing. We're way behind schedule. People will wind up sleeping outdoors.

[William Trudel]

I think that's already the case.

[Jacques Gourde, Conservative, Lévis—Lotbinière, QC]

How far should we reduce red tape? Is it possible to cut a 15-page form down to 3 pages?

[William Trudel]

I'm just going to give you a concrete example.

To be a major borrower from the Canada Mortgage and Housing Corporation, you have to have a certificate for projects valued at more than $100 million, a limit that we've long exceeded. It's a rigorous process, and I clearly understand why. Every year, we actually have to demonstrate to CMHC our financial capacity to carry out our projects and to undergo a risk analysis of our governance method, our funds and our capital.

So this certificate is valid for a period of 12 months and has to be renewed every year. We just completed the one for last year this past week. It took nearly 6 months of analysis to get a compliance certificate that's valid for only 12 months. At the end of the sixth month, I was asked the same questions as I was asked the first time because it was already out of date. As a result, I'm going to have a major borrower certificate that will last me 6 months, and I'll have to redo it next year and spend another 6 months to get a certificate that's valid for 12 months.

[Jacques Gourde, Conservative, Lévis—Lotbinière, QC]

I have another question for you, but you may submit your answer in writing if you don't have time.

Is it still possible to build affordable housing in Canada with all this regulation?

[William Trudel]

It's still possible, because we’re doing it, but it's very difficult. I can tell you one thing: We have to be ingenious, we have to work hard, and we have to have a dedicated team. We have to work with our community and our collectivity. We have to work with the community organizations.

Don't forget one thing: Every time one of the three levels of government invents a new tax, it inevitably adds to the cost of housing. The unit of measure in property development is a “housing unit”. In cars, the unit of measurement is the kilometre, but, for us, it's the “housing unit”. A new tax created by one of the three levels of government will necessarily add to the cost of everyone's rent.

[The Chair, Conservative, Kelly McCauley]

Thank you very much.

Mr. Bains, we'll go over to you, please, sir.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

Thank you, Mr. Chair.

Thank you to both of our witnesses for joining us today and for providing some very interesting comments and testimony here.

I'd like to go back to Mr. Trudel.

Can you expand on some of the challenges you talked about? We have a couple of projects that we were able to successfully get done in Richmond, British Columbia, with respect to affordable housing for women, women with children and vulnerable members of our community.

I see some of these things, and this one project specifically at Steveston Highway and Railway Avenue is an 18-month project. I look at that and say “wow” because I understand how long it does take to get things done. It took the partnership between the municipality and the federal government, and in this specific project, it was a direct one with the municipality.

What are some challenges? You said that all levels of government.... If they can work together, what kinds of things need to be done to improve the regulations to get things done more quickly, in your estimation? What are some recommendations you can make?